TILBURG, THE NETHERLANDS – Two years ago, the leaders of the world’s central banks were considered heroes for their efforts in preventing financial crisis from turning into Great Depression II. Today, however, central banks are being sharply criticized, and their independence is coming under severe pressure in many countries, particularly in the eurozone, as Mario Draghi, the head of the Bank of Italy, recently pointed out.
The type of person at the helm of any central bank is always important – but now more than ever, because financial crises always threaten central banks’ independence.
In the United States, the Federal Reserve seems to have support only of the Obama administration, hardly something of which to be proud. Congress has disparaged the Fed’s handling of the crisis, and Representative Ron Paul of Texas, who believes that the Fed’s very existence is unconstitutional, will take over one of the key congressional oversight committees in January. More than half of all Americans want politicians to have more say over monetary policy – a scary prospect in view of the historical record.
Given the likelihood of a long period of sub-par economic growth, increasing pressure on public finances in the eurozone, and the ongoing debate on the future of the euro, the European Central Bank has become, more than ever before, the last line of defense for Europe’s common currency. A firm ECB president, unwilling to yield to political pressure, is needed.